Lebanon Economic Monitor, Fall 2024

Investment Rating - The report indicates a negative outlook for the Lebanese economy, projecting a contraction of 5.7% in 2024, with a significant decline in real GDP growth by an estimated 6.6% due to the ongoing conflict [24][40]. Core Insights - The conflict in Lebanon has escalated sharply, leading to mass displacement and destruction, with economic activity projected to contract significantly, reflecting a loss of US$4.2 billion in consumption and net exports [24][40]. - The cumulative decline in real GDP since 2019 is expected to exceed 38% by the end of 2024, deepening the pre-existing economic crisis [24][26]. - Key sectors, particularly tourism, have suffered major losses, further eroding Lebanon's economic potential and posing significant risks to long-term growth [24][26]. - The current account deficit is likely to deepen, with high imports of essential goods and declining exports straining Lebanon's economic fundamentals [24][26]. Summary by Sections Economic Developments - The report highlights a dramatic 62.3% decline in luminosity from 2019 to 2023, indicating severe contraction in economic activity [26]. - Dollar earners have experienced a cumulative 4.9% decrease in purchasing power from September 2019 to 2024, compared to a staggering 5,970.7% cumulative inflation faced by LBP earners [26]. Fiscal Developments - Lebanon's fiscal position is expected to deteriorate further due to urgent funding needs for affected populations and reduced fiscal revenues, particularly from VAT [24][40]. - The sovereign default since March 2020 limits Lebanon to minimal humanitarian aid, necessitating comprehensive debt restructuring to regain access to international capital markets [24][40]. External Sector - The report notes that the current account deficit continues to be financed by a heavily dollarized cash economy, which undermines recovery prospects [24][40]. - Imports of essential goods are expected to remain high, while declining exports and tourism receipts further strain Lebanon's economic fundamentals [24][40]. Special Focus - The report emphasizes the urgent need for comprehensive reforms to achieve macroeconomic stability, improve governance, and enhance public utilities [26][40]. - Targeted investments are critical to support sustainable reforms, facilitate recovery of essential services, and rebuild Lebanon's damaged capital stock [26][40].